Statement of Kris Polly, Deputy Assistant Secretary for Water and Science
Bureau of Reclamation
U.S. Department of the Interior
Before the
Indian Affairs Committee
U.S. Senate
on
S. 3128
White Mountain Apache Tribe Rural Water System Loan Authorization Act

September 11, 2008

Mr. Chairman and members of the Committee, my name is Kris Polly, Deputy Assistant Secretary for Water and Science. I am pleased to provide the Department of the Interior's views on S. 3128, the White Mountain Apache Tribe Rural Water System Loan Authorization Act. The Administration does not support S. 3128. S. 3128 would require the Secretary of Interior, within 90 days of the legislation's enactment, to provide funding in the amount of $9.8 million to the White Mountain Apache Tribe (Tribe) to initiate the planning, engineering, and design of a rural water system (known as the "Minor Flat Project") that is intended to be the centerpiece of a future settlement of the Tribe's water rights claims in Arizona. Until a final settlement of the Tribe's claims has been reached and enacted by Congress, we do not support the Federal government providing consideration for, or a contribution to a possible future litigation settlement. S. 3128 requires the Federal government to provide the Apache Tribe with $9.8 million, but does not require the Tribe to reimburse the Federal government. As such, an upfront appropriation for the full amount of the proposed feasibility-level study from the Bureau of Reclamation's budget would be needed. In addition, this would essentially authorize loan forgiveness as no non-Federal contributions would be repaid to the United States Treasury.

The White Mountain Apache Reservation lies within the Salt River sub basin which provides the Phoenix metropolitan area with much of its water supply. Since 2004, the Department of Interior has been participating in negotiations with the White Mountain Apache Tribe (Tribe), the State of Arizona, the Salt River Project, various Arizona cities and irrigation districts, Freeport McMoran Copper & Gold, Inc, the Central Arizona Water Conservation District, and other water users in the Salt River basin regarding the water rights of the Tribe. The parties have made significant progress in resolving numerous disputed issues, including the total amount and source of settlement water to be provided under a settlement, but a final settlement has not been agreed to by all of the settlement parties. As the Administration has stated in previous Indian water right settlements, water rights settlements must be designed to ensure finality and protect the interest of the Tribes and all American taxpayers.

The key component of the settlement being negotiated by the parties is the construction of the "White Mountain Apache Tribe Rural Water System," which would provide a 100-year water supply for the Reservation through the construction of Miner Flat Dam on the North Fork of the White River and related water delivery infrastructure. This project would provide replace and expand the current water delivery system on the Reservation, which relies on a diminishing groundwater source and is quickly becoming insufficient to meet the needs of the Reservation population. The need for reliable and safe drinking water on the Reservation is not in question and it may be that the project proposed by the Tribe is the best way to address the need. However, more analysis needs to be done to determine the best course of action. As such, the Administration believes S. 3128 is premature.

Although S. 3128 authorizes only $9.8 million for planning, engineering, and design of the Tribe's proposed project, it is the first step toward a settlement under which the settling parties are likely to request that the United States provide at least another $100 million in federal funding. S. 3128 cannot be considered in a vacuum and the settlement that is intended to fund the Tribe's proposed project must be taken into consideration. The Tribe estimates the cost of the proposed project at approximately $128 million in today's dollars. This estimate has not been verified by the Bureau of Reclamation nor has it completed a feasibility level study which would be typical before Reclamation would request funding and authority to construct such a project. Therefore, Reclamation cannot provide assurance that the project can actually be constructed within this estimate. Within the next year, Reclamation intends to initiate its own review of the cost estimate prepared by the parties to provide a higher level of assurance. This review would not involve the engineering work proposed under S. 3128, but may provide some important information to the Tribe to assist in the planning, engineering and design that they propose to undertake pursuant to S. 3128.

In negotiating Indian water rights settlements, the Administration follows a process contained in the Criteria and Procedures for the Participation of the Federal Government in Negotiations for the Settlement of Indian Water Rights Claims ("Criteria") (55 Fed. Reg. 9223 (1990)). Among other things, the Criteria provide policy guidance on the appropriate level of Federal contribution to settlements, incorporating consideration of calculable legal exposure plus costs related to Federal trust or programmatic responsibilities. In addition, the Criteria call for settlements to contain non-Federal cost-share proportionate to the benefits received by the non-Federal parties, and specify that the total cost of a settlement to all parties should not exceed the value of the existing claims as calculated by the Federal Government.

Equally important, the Criteria address some bigger-picture issues, such as the need to structure settlements to promote economic efficiency on reservations and tribal self-sufficiency, and the goal of seeking long-term harmony and cooperation among all interested parties. The Criteria also set forth consultation procedures within the Executive Branch to ensure that all interested Federal agencies have an opportunity to collaborate throughout the settlement process. As we have testified previously, the Criteria is a tool that allows the Administration to evaluate each settlement in its unique context while also establishing a process that provides guidance upon which proponents of settlements can rely.

The Administration is in the process of analyzing the factors set forth in the Criteria in order to determine the appropriate federal financial contribution that could be recommended to Congress as consideration for settling the Tribe's water rights claims.

The Department of the Interior and the Department of Justice are in the process of analyzing the Tribe's water rights claims and have requested the Tribe to provide information on its views on potential liability the United States may have with respect to those claims and other water related claims. Until that analysis is completed, it is not possible for the Administration to determine whether paying for some or all of the construction of the proposed project is an appropriate Federal settlement contribution. Until those decisions are made, it is premature to begin design and engineering of the proposed project. The legislation is ambiguous as to whether the Department is required to carry out a feasibility study for the planning, engineering, and design of the Miner Flat Project.

As currently drafted S.3128 provides that funding made available to the Tribe will not be repaid by the Tribe, but will be repaid out of a subaccount created by Section 107(a) of the Arizona Water Rights Settlements Act "for use for Indian water rights settlements in Arizona approved by Congress after the date of enactment of [the Arizona Water Rights Settlements Act]. . . ." We understand that the bill is likely to be amended to delete repayment from this source. We recommend such an amendment to S. 3128 because the use of this subaccount to fund an activity absent a water rights settlement enacted by Congress is not consistent with the authorized uses of the subaccount created by Section 107(a) of the Arizona Water Rights Settlements Act.

The Administration is concerned about the potential budgetary impact the $9.8 million loan, as authorized under S. 3128, would have on the Bureau of Reclamation's existing programs and commitments, and has concerns with the mechanisms and sources of funding. Although the repayment is provided from Federal Funding in Section 3, budget authority for the full $9.8 million would be required up front. Section 5 of S. 3128 authorizes appropriations, but Section 3 provides that the funds to repay the loan would be made available from the Colorado Lower River Development Fund starting in 2013. The Administration also remains concerned that, as S. 3128 provides for no reimbursement by non-Federal parties, the Federal government would be the primary source of funding for this feasibility (planning, engineering, and design) study.

The Administration does not support this bill but is committed to working with the Tribe and other settlement parties to reach a final and fair settlement of the Tribe's water rights claims.